Franchising in Canada: The Importance of Due Diligence

Franchising in Canada is one of the best ways for entrepreneurs to set themselves up for success in a given industry, but it’s not foolproof. If you don’t practice due diligence, you could be gambling your family’s financial future.

In today’s post, we discuss the importance of due diligence and introduce readers to a responsible franchise research process.


Defining Due Diligence

Broadly speaking, due diligence is defined as the “reasonable steps taken by a person in order to satisfy a legal requirement, especially in buying or selling something.”

For prospective franchisees, due diligence is about quality research. Before you buy a franchise, you need to investigate and evaluate every aspect and implication of that purchase. This means taking a closer look at the total cost of training, analyzing the value and visibility of the marketing, and getting a feel for the organizational culture you’re potentially buying into.

Since franchising in Canada usually involves signing a multiyear contract, it is crucial that you take the time to conduct this research before you make a commitment.


Outlining the Due Diligence Process

So what should the due diligence process look like?

Franchisees ought to start by taking an intrinsic look at themselves. If you want to make the right decision, you’ll need to have a concrete idea of your likes and dislikes, experience, skills, business philosophies, and long-term goals. Be realistic about your budget and how much time you want to dedicate to your work. Take a look at your personality, too; an introvert won’t thrive in a customer service-oriented industry, and an innovator won’t be happy with a brand that uses rules and rigid processes to maintain consistency. Franchise advisers can help you complete this step; it’s usually a good idea to bring in an objective voice informed by industry experience as early as possible.

Once you’ve completed your self-analysis, you can start to identify your business preferences. At this stage, your goal isn’t to narrow down specific brands. Instead, make a list of industries and business models that appeal to you.

Next, it’s time to pinpoint specific franchises that fit your criteria. Research each prospective franchise system thoroughly. Gather what information you can from their website, but don’t take this as gospel; it’s any business owner’s instinct to paint themselves in the best possible light. Instead, use this information as a jumping-off point. Cross-reference their claims and search for media coverage in newspaper archives, databases, and review websites. You can also use what you find on a franchisor’s website to inform the questions you’ll ask current franchisees. Speak with people currently involved in franchise systems, either by visiting their locations or by attending franchise conferences.

After you’ve identified your prospects with some general research, you can start to initiate contact. Request information about the franchise and market via their websites and review these documents carefully. At this point, it is recommended to contact a franchise adviser to help you make sense of the information being sent. If you prefer to go at it alone, you can request a consultation and start the application/interview process, where you’ll usually get access to the franchise disclosure document.

With your list populated, it’s time to start killing off contenders. Our advisers are standing by to help! Take a free, no-obligation consultation or visit our website to learn more.


About FranNet Canada

FranNet is a 29-year-old company with roots in the U.S. Its purpose being to nurture every entrepreneur’s dream of business ownership. We actively employ a specific profiling and consultation method. This method is geared to each investor with a specific business model and based on franchise trends typically found in Toronto, Ontario, Vancouver, British Columbia, or Calgary, Alberta. The most lucrative Canadian franchise opportunities are waiting for you.


Feb 19, 2017